Nations with huge trade surpluses are in much more economic danger than nations with trade deficits like the U.S.
Like the U.S. in 1930, leading exporters today stand to lose the most jobs with a collapse in world demand.
The possibility is continued cataclysmic collapse in trade, leading to massive downturns in GDP and jobs in the export leaders.
That's right, it's the most successful exporting powerhouses like Germany, China, Korea and Japan which are in the greatest economic danger. Much more so than the U.S.
Their only hope is to create serious domestic demand increases, which would require drastic plans to accomplish. Such plans are not visible, although China has taken a partial step.
It's not that no response at all has occurred. Germany did try a clever auto trade-in scheme for instance. China promptly developed a lending/building&infrastructure-boom, which isn't exactly consumer demand, but is better than nothing. But these, while helpful, are far from the real economic strength that would come for instance from China supporting its own growth via increasing Chinese consumer demand.
While China pressed the Keynesian stimulus button at least partly, Japan tried a new tack, Korea aimed green, and Germany begrudged a small stimulus inadequate for a nation where exports were 47% of GDP, the truly enigmatic picture has been Germany.
It only took a moment to guess why Germany was reluctant to try sizable deficit Keynesian spending (in proportion to the large downturn) months ago if you remember your history -- the hyperinflation of the Weimar Republic is their greater economic memory, not the Great Depression, which Germany quickly escaped.
But in recent months, as we watched job loss and panic around the world, the Germans seemed comfortable, busy shopping, unaffected. While German trade figures dropped precipitously, the mood in Germany seemed...chipper.
But it turns out there's a reason Germany defied economic logic for a while...
Marketplace points out why:
STEPHEN BEARD:"...rather than lay off large numbers of staff, German companies have kept them on, working a shorter week, often with a Government subsidy, in the hope of an early upturn....
SIMON TILLFORD:"The assumption that there will be a relatively robust economic recovery now looks pretty far-fetched, hence German companies are going to start laying off workers in large numbers over the next six months....
ANDREW HILTON:" ...If the U.S...bounces back, the German economy will bounce as a result...but, if the recession is prolonged in the U.S....we will see rising unemployment in Germany...focused in the export sector."
Could these strong, hardworking nations do something about their impending employment waterfall?
But will they?